Services, Service Standards and Economic Redemption
I am back from a trip to the land Down Under where I spent most of my days visiting friends and revisiting those fond memories of the days when those tips from my time waitressing came in handy for the extra expenses that the monthly parental allowance could not afford.
Life has gotten much more expensive since but one cannot tire of eating that same eggs Benedict breakfast that has become the mainstay feature of breakfast menus in those hip cafes in the city centre, the suburbs and the countryside that I patronised with the level of service I was getting.
My mind raced. Since when did eggs Benedict go global, to become a breakfast staple from London to Singapore to Australia ? Since when did eggs Benedict cost 20 dollars a serve in AUD and SGD alike?
Hardly important questions in the grand scheme of the services culture revolution that we have witnessed in the short span of a about decade, best epitomised in the smiling faces of those cafe staff serving eggs Benedict with a warm greeting, smile and small talk that extends the 20 dollar from a meal to an almost bespoked dining experience.
Australia has the highest minimum wages in the world, so high, at A$17.29, that it has led to many an economist condemnation that it will be an Achilles heel in current times when commodity prices have all but collapsed which is hardly evident in the prices I was seeing in the shops and the smiles on the faces of the shop attendants (who were collecting their min. wages, no doubt) in a country where the wealth gap is not as severe as most of the rest-of-the-world.
I shall stop here, upon realising that minimum wages was a topic in the recent Singapore elections, a watershed one, in my opinion, and a turning point in the economic landscape of the country where leaders have already recognised the importance of the service industry and the services excellence key to making that difference which has led us to the forefront of city infrastructure, ranking top in the world back in 2012 and coming second this year only to Hong Kong in a World Economic Forum survey which could have possibly led to the early retirement of the Transport minister.
My thoughts today are of the continued growth of the services industry, evolution of services and the subject of service excellence that could be the missing link in the gears of economic growth.
When we talk about the services industry, we think of banking which is financial services and business services and more.
China is now looking inwards to growth in their attempt to combat their slowing economy, keeping services onshore instead of importing them and looking to boost local consumption of value added services in a gear shift.
As for Singapore, the financial services sector is the only bright spark in GDP growth, delivering >7% for 2015 and the service sector employed 2,151,400 people out of 3,102,500 jobs in December 2010. (Source: Wikipedia)
The trend is towards services globally even at a consumer level as each of us spend more time on Facebook, use Uber to get around and drive Uber cars when we are free, buy our products on Amazon and sms over Whatsapp. This is evident in US consumer spending patterns over the decades where in these days, “The defining consumer product of our age is the smartphone. A smartphone is a good, and it takes resources to make and transport it. Still, it takes a lot less resources than, say, a car. Most of its value is in the software that is loaded onto it and the people, information and entertainment you can connect to with it. That’s a different sort of value creation than 20th-century resource-based value creation.”
As economies mature, household spending patterns also change to focus on insurance and education expenditure swinging away from goods consumption to service based ones and we can include foot massages and facials for those as well.
Like we said last week, if the trend is towards economic inequality, there will be limits to how much wealthy people consume because, really, one usually only has 3 meals a day, wear 1 watch and drive 1 car at a time.
And thus, the 2014 Bain Worldwide Luxury Goods report has acknowledged a slowing in the personal luxury goods market but what is of interest is that company owned retail channels are gaining sales over wholesale channels. By that I would suppose that consumers prefer to make their purchases in a Cartier store than from a departmental store which could be due to increased promotional efforts or simply, because the shopping experience is a whole lot more pleasant for the same price.
The Bain report revealed interesting trends in the uneven pace of growth in the luxury goods and services market that is driven by cars, hospitality and jets.
The business of being “bespoked” is the key differentiator, don’t you think ? Not much different from 20 dollar eggs Benedict served well by an engaging waiter who convinces you to part with 5 dollars more for that extra dollop of tobiko on top, 50 dollars for a shave of black truffle and perhaps a hundred or two for Beluga caviar eggs Benedict.
Yes, we have “bespoked” gentlemen barbers (spotted one in Tiong Bahru) and personal stylists in Singapore and I did book a luxury holiday with A&K last year but for me, it boils down to the business of waiting on tables and the extra value add to the whole operations which is perhaps why a waiter in New York told me he makes US$150,000 a year – 2/3 from tips alone, which is quite close to what an obstetrician makes, and business is good which is a win-win situation.
It Starts From The Bottom
I am not sure if it is just me or if it is the foreign worker policy but I have noted that service standards are improving in Singapore these days. A restaurant owner has told me that starting wages for his waiting staff start at S$3,500 which is more than double what he used to pay before the labour policy was changed.
Happy workers means happy customers and I know that first-hand from my waitressing days with my A$10 an hour min. wages then and since then, I have always secretly championed hawker rights!
If companies have no qualms about paying up for good managers and we have a horde of head hunters out there for banking and finance, IT and such, why not for the chap who serves our coffee?
Using Singapore as an example, median wages are at S$3,770 and that works out to S$45,240 per annum which is 75% lower than Singapore’s US$56,319 (approx. S$75,000) GDP per capita calculated by the IMF.
Instead of trying to raise GDP per capita by itself, if we can possibly coax that 75% gap lower, we could see a rebound in consumption, for starters, which is what is happening in the US as companies like Walmart raise the minimum wages for their staff. Such a scenario for Singapore would be inevitable as politics continue to play to the masses and as corporations continue to latch onto the “bespoke” differentiation strategy and hunt for the staff and the service that makes the difference.
The service quality trend is here to stay and with it, we can only expect higher standards and product differentiation from here which is bad news for low cost employers because costs will only edge higher.
This translates into opportunities for investors to buy into those industries where we can expect wages to flow into after all the watches and cars are done with – into travel, insurance, entertainment and F&B – those middle class discretionary purchases that complement the lifestyle.
Give it a couple of years, surely this would be the saving grace for the current global economic slowdown?